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Managing a
Global Workforce
Managing a
Global Workforce
Challenges and Opportunities in
International Human Resource Management
Charles M. Vance
Yongsun Paik
M.E.Sharpe
Armonk, New York
London, England
Copyright © 2006 by M.E. Sharpe, Inc.
All rights reserved. No part of this book may be reproduced in any form
without written permission from the publisher, M.E. Sharpe, Inc.,
80 Business Park Drive, Armonk, New York 10504.
Library of Congress Cataloging-in-Publication Data
Vance, Charles M., 1952–
Managing a global workforce : challenges and opportunities in
international human resource management / by Charles M. Vance and Yongsun Paik.
p. cm.
Includes bibliographical references and index.
ISBN-13 978-0-7656-1069-0 (cloth : alk. paper)
ISBN-10 0-7656-1069-8 (cloth : alk. paper)
1. International business enterprises—Personnel management. 2. Personnel management.
I. Paik, Yongsun, 1956– II. Title.
HF5549.5.E45V46 2006
658.3—dc22
2006005775
Printed in the United States of America
The paper used in this publication meets the minimum requirements of
American National Standard for Information Sciences
Permanence of Paper for Printed Library Materials,
ANSI Z 39.48-1984.
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INTRODUCTION
AND
OVERVIEW
To our dear wives and precious children:
the global source of our support and inspiration.
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CONTENTS
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Contents
Foreword
Preface
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1. I NTRODUCTION AND O VERVIEW
Attracting Factory Workers in China
Introduction
Global Market Context
Key Perspectives in Global Workforce Management
Book Overview
Summary
Questions for Opening Scenario Analysis
Case 1.1. The United Nations of Bananas
Case 1.2. MNC Collaboration in Social Responsibility
Recommended Website Resources
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2. C ULTURAL F OUNDATIONS OF I NTERNATIONAL H UMAN
R ESOURCE M ANAGEMENT
International Merger Misery at DaimlerChrysler
Introduction
Understanding Culture
Major Models of National Culture
Cultural Convergence versus Divergence
Final Caveats on Culture and Global Workforce Management
Summary
Questions for Opening Scenario Analysis
Case 2.1. Cross-Cultural Assessment over a Cup of Coffee
Case 2.2. Culture Conflict South of the Border, Down Mexico Way
Recommended Website Resources
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CONTENTS
3. C HANGES AND C HALLENGES IN THE G LOBAL L ABOR M ARKET
Vietnamese Vendors in Prague
Introduction
Globalization
Technological Advancements
Changes in Labor Force Demographics and Migration
Emergence of the Contingent Workforce
Offshore Sourcing
Global Workforce Management Challenges
Summary
Questions for Opening Scenario Analysis
Case 3.1. Free Movement of Labor Across National Borders
Case 3.2. Europe: The New Destination for Latino Workers
Recommended Website Resources
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4. T HE K EY R OLE OF I NTERNATIONAL HRM IN
SUCCESSFUL MNC S TRATEGY
Is Accenture’s Global Face Really a Facade?
Introduction
Knowledge Transfer
Global Leadership Training and Development
Strategic Control Needs
Competitive Strategies of Multinational Corporations
Structuring for Optimal Global Performance
Linking Human Resource Management Practices to Competitive
Strategy and Organizational Structure
Paradigm Shift of International Human Resource Management from
Contingency Model to Process Development
Summary
Questions for Opening Scenario Analysis
Case 4.1. Lenovo’s Purchase of International Business Machine
(IBM) PC Division
Case 4.2. Foreign Buyouts Heighten Tensions in Germany
Recommended Website Resources
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5. GLOBAL H UMAN R ESOURCE P LANNING
“Who Are Our Employees, Anyway?”
Introduction
From Strategy to Decisions about Work Demand and Labor Supply
External Environmental Scanning
Job Design for Meeting Global Strategy Work Demand
Sources of Global Labor Supply for Meeting Work Demand
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CONTENTS
HR Planning for the Long-Term
Summary
Questions for Opening Scenario Analysis
Case 5.1. HR Planning for Executive-Level Gender Diversity
Case 5.2. A Google Search—For Talent
Recommended Website Resources
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6. G LOBAL S TAFFING
Global Staffing at the Royal Dutch/Shell Group
Introduction
General Factors Affecting Global Staffing
Global Recruitment of Human Resources
Global Selection of Human Resources
Summary
Questions for Opening Scenario Analysis
Case 6.1. MNC Staffing Practices and Local Antidiscrimination Laws
Case 6.2. Local Staffing for Global Business Outsourcing Success
Recommended Website Resources
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7. G LOBAL W ORKFORCE T RAINING AND D EVELOPMENT
Motorola University
Introduction
Strategic Role of Training and Development in the Global Marketplace
Fundamental Concepts and Principles for Guiding Global
Training and Development
Training Imperatives for the Global Workforce
Summary
Questions for Opening Scenario Analysis
Case 7.1. Training and Retaining Qualified Managers in China
Case 7.2. HCN Supervisory Training Needs
Recommended Website Resources
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8. M ANAGING I NTERNATIONAL A SSIGNMENTS
Expatriate Innocence Abroad
Introduction
Expatriate Preparation, Foreign Assignment, and Repatriation
International Assignment Considerations for Special Expatriates
New and Flexible International Assignments
Summary
Questions for Opening Scenario Analysis
Case 8.1. Working in a Sheltered Enclave in Shanghai, China
Case 8.2. Re-Entry Shock: A Family Affair
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CONTENTS
Recommended Website Resources
Appendix 8.1. Important International Business Travel Considerations
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9. GLOBAL W ORKFORCE P ERFORMANCE M ANAGEMENT
Puzzling Performance Appraisal
Introduction
Performance Management Process
Important Considerations for Global Performance Management
Planning and Implementing Global Performance Appraisals
Summary
Questions for Opening Scenario Analysis
Case 9.1. Upstream Performance Management: Culture Shift at Citigroup
Case 9.2. Customizing HCN Performance Appraisal Design
Recommended Website Resources
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10. C OMPENSATION FOR A G LOBAL W ORKFORCE
Compensation Convergence
Introduction
Managing Compensation on a Global Scale: Fundamental Practices
Key Compensation Considerations for Expatriates, HCNs, and TCNs
Summary
Questions for Opening Scenario Analysis
Case 10.1. Europe Straining under Pension System Burden
Case 10.2. Executive Pay: Increasing the Threat of China’s Wealth Gap
Recommended Website Resources
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11. GLOBAL E MPLOYEE R ELATIONS
Union Trouble in Korea’s Auto Industry
Introduction
Current ER Issues
Influence of MNCs and Unions on Global ER
Summary
Questions for Opening Scenario Analysis
Case 11.1. At Domino’s, ER Begins with Managers
Case 11.2. Age Discrimination in the Workplace
Recommended Website Resources
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Notes
Index
About the Authors
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FOREWORD
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Foreword
In the past two decades or so, most societies around the world have experienced
changes, unparalleled in scale and scope to those encountered in preceding centuries. These include the globalization of industries; regional economic integration;
the formation of international strategic alliances across firms in different industries
and countries; the lowering of immigration and emigration barriers to the movement
of people, thus contributing to growing diversity in the workforce; and quantum
advances in telecommunications that enable almost instantaneous access to information and communication at the click of a mouse (Tung 1998a).
To cope with these dynamics, organizations have to develop and retain a cadre of
globally minded executives who can move with chameleon-like ease from one country to another. The development and retention of this cadre of executives who have
perfected the art of acting local worldwide—referred to by some as “corporate diplomats” (Saner, Yiu, and Sondergaard 2000)—are not easy. Some companies lose market
share and prospective business because their executives are unable to perform effectively in other countries. Thus, companies have to recruit and develop such talent.
However, even after a company has successfully hired and nurtured this talent, with
the emergence of “boundaryless” careers (Tung 1998b), organizations have to work
hard to retain these people. Increasingly, highly skilled and qualified employees are
willing to leave their country of origin to relocate elsewhere, for career, personal,
and/or financial reasons. In other words, in order for a company to survive and thrive
in this new calculus of global competition, they have to effectively manage their
human resources, including their selection, training and development, compensation
and retention. Thus, human resource management has become pivotal to a firm’s
global competitiveness because capital and technology cannot be effectively allocated nor transferred across international boundaries in the absence of people.
This book by Charles Vance and Yongsun Paik seeks to address many of the
challenges and opportunities that arise in the context of international human resource
management. Drawing upon research findings, the chapters examine how environmental and institutional constraints, including culture, impact human resource planning and other human resource functions of international firms. Abundant up-to-date
examples from around the world are provided along with short case studies to highxi
xii
FOREWORD
light the issues presented in the text. A very useful feature of the book is the inclusion of relevant websites that readers can access the latest information on issues that
bear on international human resource management.
In all, the Vance and Paik book is an effective tool to prepare our students, both
graduates and undergraduates, to understand the dynamics and issues pertaining to
managing a global workforce. The case studies should encourage students to analyze
situations that may actually arise as they enter the real world of business after graduation. Practitioners should also benefit from the wealth of information contained in
the book to enable them to better deal with the opportunities and challenges associated with managing diversity, cross-border international assignments, and management of international strategic alliances.
Rosalie L. Tung, FRSC
The Ming & Stella Wong Professor of International Business
Simon Fraser University (Canada)
R EFERENCES
Saner, R.; Yiu, L.; and Sondergaard, M. 2000. “Business Diplomacy Management: A Core Competency
for Global Companies.” Academy of Management Executive, vol. 14, no. 1, pp. 80–92.
Tung, R.L. 1998a. “A Contingency Framework of Selection and Training of Expatriates Revisited.”
Human Resource Management Review, vol. 8, no. 1, pp. 23–27.
———. 1998b. “American Expatriates Abroad: From Neophytes to Cosmopolitans.” Journal of World
Business, vol. 33, no. 2, pp. 125–44.
PREFACE
xiii
Preface
As this text goes to press we are witnessing extraordinary changes, pressures, and
challenges confronting profit and non-profit organizations throughout the world.
Organizations struggle to prosper and even survive under the continually developing
influence of globalization, with its increasing market accessibility and openness,
technological advancements, cross-border direct and virtual exchanges and interactions, common cultural convergence, often unpredictable and adversarial sociopolitical
environments, and especially unrelenting competition. Within this global context,
we note many difficult and vexing workforce-related challenges, such as those faced
in Europe driven by pressures for greater economic flexibility, and forcefully illustrated by recent demonstrations, and even violence, in France in protest against new
employment laws that favor business staffing needs and promote long term increased
employment at the short term expense of younger workers.
In Asia, with multinationals’ ongoing experience and technological advancements,
we find India’s low cost but talented labor force supporting that country’s continuing development as a major leader in cost-saving offshore foreign direct investment
arrangements (both in-house and outsourced) in many forms of more mundane back
office business processes, as well as competitive high-tech research and development. The People’s Republic of China, following nearly two decades of remarkable
economic growth accompanied by unfathomable societal sacrifice, displacement,
and pain, is experiencing increasingly frequent and uncharacteristically vocal protests from its citizenry, now met by a major official shift by the central government
epitomized in its “People First” policy. Companies planning for business development in China should consider possible implications for their internal operations and
practices of this newly espoused priority in China involving the present and future
labor force. Indeed, in China and beyond, many business leaders consider the internal and external environments in which they must operate to be in a state of crisis.
But as a Chinese word for crisis (weiji) carries with it the double meanings of both
“threat” and “opportunity,” organizations large and small throughout the world may
find that their effective management of their workforce can serve to seize opportunities to propel them ahead within the globally competitive arena.
xiii
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PREFACE
In our many years of teaching executive, graduate, and undergraduate programs
and courses related to global workforce issues, we have felt the need to emphasize
the critical role of the human resource function in achieving organizational objectives. In addition, we have recognized that managers and leaders have a central responsibility in supporting and implementing this human resource function, with the
professional assistance of human resource specialists. However, we have not been
satisfied with existing texts on international human resources that seem directed
more at human resource specialists rather than the more generalist managers and
senior decision makers in charge of strategy formulation and implementation. Existing texts also have focused primarily on the challenges and needs of expatriates of
the multinational firm’s home country at the unfortunate neglect of host country and
third country nationals, as if the expatriates were the only members of the global
workforce that matter. In addition, employees involved in a firm’s contracted and
outsourced work largely have been left out of the picture. We therefore have written
this text to provide a more complete and comprehensive picture of the challenges
and opportunities in managing an organization’s total global workforce.
We have many people to thank, who have contributed much to the development
of this text, including our past students with whom we have shared in the development of new insights related to the continually evolving and expanding arena of
international human resource management. We are especially grateful to editor Harry
Briggs of M.E. Sharpe, whose very helpful professional guidance, great patience,
and encouragement have been essential to the successful completion of this text. We
are particularly indebted to Irene Chow of the Chinese University of Hong Kong,
Sully Taylor of Portland State University, and Mark Mendenhall of the University of
Tennessee at Chattanooga for their helpful feedback and guidance on our work. Our
work also has been greatly influenced by numerous academics and practitioners in
the field throughout the world with whom we have interacted over the years at professional meetings and through other professional communications, and under whose
influence we are continually learning.
We are also grateful for the early vision and continuous support of Dean John
Wholihan of Loyola Marymount University in encouraging our gaze toward the global marketplace. And we are truly indebted to the tremendous leadership of Loyola
Marymount University’s former MBA director Dan Stage, whose inspired Comparative Management Systems international study tour program provided us with
many invaluable opportunities for international field research and professional networking, so very influential in the development of our ideas and perspectives. We
also express thanks to our past MBA research assistants, Jason Recacho and Geoffrey
Lewis, who were of great help with manuscript organization and refinement details.
Finally, we are extremely grateful to our talented, generous friend and administrative assistant, Kathe Segall, who from the beginning provided great care and support
for the development of this text, and who at the close made a special concerted effort
and reorganization of her work priorities to help us finally get our completed manuscript out the door.
Although we are very pleased with the result of our work, we acknowledge our
human limitations and possible errors in our attempt to provide a comprehensive,
PREFACE
xv
useful picture of international human resource management. We also know how
quickly this picture can change. We therefore invite those who use this text—
students, instructors, and practitioners alike—to give us feedback, whether confirmatory or corrective, and share insights, thus joining with us in a collegial effort to
better understand the current and developing challenges and opportunities in managing a global workforce.
Charles M. Vance (cvance@lmu.edu) and
Yongsun Paik (yspaik@lmu.edu)
Los Angeles
Managing a
Global Workforce
INTRODUCTION
1
AND
OVERVIEW
3
Introduction and Overview
A TTRACTING F ACTORY W ORKERS IN C HINA
Who would guess that there could be a shortage of factory workers in China, the
world’s most populous country? But after decades of abundant cheap labor willing
to put up with long hours and uncomfortable working conditions, the Pearl River
Delta—southern China’s manufacturing heartland, which produces a large share
of the world’s shoes, clothing, and electronics—is facing labor shortages estimated
at two million under the level of demand. Workforces in other regions are also in
short supply. As a result, more Chinese manufacturers are paying much closer
attention to something they rarely did before: keeping their low-wage workers happy
and attracting new ones.
This labor shortage is partly due to the nation’s increased prosperity, which is
leading to the rapid growth of rival, higher-paying manufacturing facilities in other
regions of China, often drawing from the heretofore plentiful labor supply in southern China. To add to the challenge, the government’s recent increase in agricultural
subsidies, along with increases in grain sale prices and the cost of living in urban
areas, make remaining away from the urban factory and back on the farm a more
attractive proposition.
The labor shortage in coastal cities is also unexpected, given China’s 1.3 billion
population, high levels of unemployment, and surplus rural labor officially estimated
at 150 million. Some optimistic economists believe that we are seeing a short-term
problem that will soon be resolved as rural migrant workers become informed about
the rising labor demand. However, others believe that the shortage is more deep
rooted, resulting from rising skill requirements and slower labor force growth due to
China’s strict population-control policies.
To compete for the limited supply of qualified workers, some manufacturers are
building facilities with previously unheard of amenities such as swimming pools,
dormitories with television access, libraries, gymnasiums, and even churches. Manufacturers that have started locating inland to take advantage of pay scales that are
about 40 percent lower than on the coast face much higher start-up costs, particularly
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CHAPTER 1
in providing attractive facilities to make up for the loss of urban attractions. Apache
II Footwear Ltd., which makes sneakers for Adidas-Salomon AG, recently relocated
to Qingyuan, a town two hours’ drive north of Guangzhou and about 300 kilometers
northwest of Hong Kong. Qingyuan is especially known for its scenic mountain
views and tasty, free-range chicken. It is completing a $25-million giant compound
that will include housing for married workers, a church, a school, a mall, and a sports
hall. Already workers are using the new kindergarten and a well-stocked supermarket. “It’s not just about pay, it’s about lifestyle,” says Apache Chief Executive Steve
Chen. “We’re building a community so people will stay.”
Ngai Lik Industrial Holdings Limited, also in Qingyuan, is facing problems recruiting workers to its plant, which makes CD players for Wal-Mart, despite delights
such as a pool table, a fully equipped karaoke room, and dancing on weekends.
Hopeful manager Nelson Chiu explains that “nobody knows about this place yet,”
while a bright red job advertisement banner hangs outside the factory with the words,
“JOB OPENINGS FOR GREAT NUMBER OF WOMEN WORKERS.”1
I NTRODUCTION
So much for the image of China as the great source of virtually limitless, readily
available cheap labor. At present, the cost of labor in China might be much lower
than in economically developed countries, yet the manufacturers from these countries who are planning to expand into China are facing changing and greater challenges in attracting an adequate supply of qualified human resources. But the human
resource (HR) challenge in China is certainly not limited to the manufacturing sector. In addition to having a manufacturing presence in China to help it make good on
its slogan of “Always low prices,” Wal-Mart is opening stores rapidly in many parts
of China, and is being joined by The Home Depot, Inc., French giant Carrefour, and
many others. These companies are spurred on by the easing of the Chinese
government’s restrictions (for example, joint venture requirements, definitions of
what can be sold and where, and so on) and the allure of China’s $600-billion retail
market, the world’s fastest-growing consumer market. With the easing of restrictions, financial service firms are also trying to enter the China market and tap into
that country’s burgeoning wealth. China’s infrastructure development remains a significant opportunity for foreign firms, and multinational construction firms are also
landing opportunities, including building malls in China to address increasing consumer spending interests. Alongside China, India also is charging into our global
market arena with more supportive government policies and fueled by its twin growth
engines of manufacturing and services.2 However, all of these areas of growth and
new business development have significant challenges associated with the acquisition, deployment, and management of labor.
For those managers and business decision makers throughout the world who are
interested and engaged in doing business beyond their own country’s borders, exciting opportunities and significant challenges are arising rapidly with the growing
influence of globalization.3 In fact, as a result of increasing globalization, even those
business professionals and companies who wish to remain within their national bound-
INTRODUCTION
AND
OVERVIEW
5
aries and not venture abroad are facing new opportunities and ever more daunting
business challenges. The “abroad” is coming to them in droves in the form of foreign
competition, foreign technology and other products, foreign suppliers, foreign customers, foreign business partners, and foreign labor (both legal and undocumented).
In fact, this foreign labor is increasingly available both in many domestic labor markets and abroad through offshore outsourcing. So whether you go abroad or stay at
home, you are in the global marketplace. As Jack Welch, the notable former CEO of
GE, is often quoted as saying, “Organizations must either globalize or they die.”4
Critical to the success of all organizations, both for profit and non-profit, in our
increasingly global marketplace is the ability to plan for, attract, develop, and retain
capable and committed employees, whether those employees are at home or abroad.
This ability in workforce management should not be restricted to those individuals
who specialize in human resources, but should be a top priority for every executive,
manager, and business professional. Each should see him- or herself as a human
resource practitioner (as opposed to a human resource professional or specialist)—
dealing with people issues in daily business practice and having a strong interest in
attracting and retaining capable and committed employees for the long-term success
of the company. This top priority is not misplaced or exaggerated: Many studies—
domestic and international—continue to identify the human factor within organizations and in strategic alliances as the greatest source of sustainable competitive
advantage.5 People (whether your own or obtained through outside sources such as a
temp agency) are essential for the effective implementation of company plans and
strategies—both in carrying out the work and in providing input and feedback on
how strategy implementation can best proceed. It also is becoming increasingly apparent with recent developments in knowledge management that employees at all
levels and worldwide company locations can provide valuable input on important
external opportunities and threats, essential for effective strategy formulation and
adjustment.6 But the challenge of managing human resources effectively to achieve
organizational strategic objectives only increases in scope and complexity with the
introduction of multiple cultures, differing national practices and regulations, and
physical distances involved with global commerce.
G LOBAL M ARKET C ONTEXT
Company leaders endeavor to manage their organizations within our growing global
market context, with its associated rapidly changing social, political, economic, and
technological forces. Within this global context, leaders face the need to carry out their
work activities through the efforts of their own home country employees as well as
their foreign employees, agents, organization partners, and suppliers. As organizational
boundaries become more permeable and less distinct with new work relationships and
collaborative agreements (such as strategic alliances, international joint ventures, and
outsourced services), and with corresponding new, more flexible workforce arrangements (for example, part-time and temporary employees and contracted labor services),
the perception of what constitutes an organization’s workforce must also be adjusted.
Thus, this changing workforce that is essential for achieving organizational goals and
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CHAPTER 1
objectives is becoming more global, diverse, flexible, multisourced, and complex in
nature, presenting vastly different opportunities and demands and increasingly difficult challenges than were even faced at the end of the twentieth century.
With this global context in mind, we must emphasize the importance of balancing
attention on the local context in global workforce management, because key factors
influencing the effective management of human resources can differ dramatically
from one local context to another.7 Figure 1.1 provides a broad picture of the many
different external global and local contextual factors that may influence key internal
company factors, which in turn determine global workforce management. Even such
broad issues as global efforts to reduce poverty, debilitating national debt, illiteracy,
hunger, social conflict and warfare, and sickness are relevant here because they affect the overall context within which multinational corporations (MNCs) may operate and expand. We now will examine each of these important external and internal
factors, which often interact and are closely interrelated, to gain a clearer picture of
the broad context for managing a global workforce.
E XTERNAL F ACTORS I NFLUENCING G LOBAL W ORKFORCE M ANAGEMENT
Figure 1.1 indicates several important factors external to a firm that managers should
consider as they plan and make decisions affecting their global workforce. These
factors may bear greater influence at different times, and some represent more local
influences warranting customization whereas others represent much more general
and global influences.
Economy
Just as local, national, regional, and global economic strength can greatly influence
business activity, economic conditions can greatly affect workforce decisions for
carrying out business activity. For example, where an economy is perceived as weak,
company growth plans may be put on hold, a hiring freeze instituted, and the use of
temporary employees emphasized. Where regions differ in their economic favorability,
MNCs shift their business activity focus to gain the greatest benefit for the company,
thus placing differing workforce demands in different regions. Exchange rates across
the financial markets of the global economy can affect human resource arrangements to a significant degree. For example, when China decided in 2005 to allow its
yuan currency to float slightly upward against the U.S. dollar, the average cost for
U.S. MNCs of outsourcing to China suddenly increased (from $12.08 to $12.33 per
hour).8 An economic crisis, such as the Asian financial crisis of the mid-1990s, can
trigger broadscale workforce downsizing, compensation reductions, and other employeerelated cost savings to protect business solvency.9
Social Preferences
This factor is made up of the broad set of beliefs, values, norms, customs, attitudes, and
expectations held by groups, communities, and societies. Culture, which represents a
INTRODUCTION
Figure 1.1
AND
OVERVIEW
7
Factors Influencing Global Workforce Management
External Factors
1. Economy
7.



2. Social Preferences
3. Competition


4. Demographics
5. Innovation
• Technology
• Management Practice
6.



Governments
Individual Governments
Multilateral Agreements
G8–G7, G8+5, G77
8.



Intergovernmental Organizations
United Nations (U.N.)
International Labor Organization (ILO)
Organization for Economic Cooperation
and Development (OECD)
World Trade Organization (WTO)
Financial IGOs
* World Bank
* International Monetary Fund (IMF)
Employee-Interest Organizations
Labor Unions
Employer and Professional Associations
Non-governmental Organizations (NGOs)
Internal MNC Factors




Company Culture
Company Climate
Company Strategy
Organizational Structure
Global Workforce Management
major consideration of social preferences with a profound, pervasive influence on international business and global workforce management, will be examined in detail in
chapter 2 and referred to throughout this book. Social preferences are also greatly
influenced by today’s communications technologies, such as the Internet, which increase widespread awareness of new issues, opportunities, and social models, rapidly
changing traditional norms and expectations. Social preferences may change over time,
such as the growing sentiment in many countries against smoking in public areas,
which may in turn influence government action toward new laws and regulations. These
preferences also may be influenced by other factors, such as government legislation
and court rulings against workplace discrimination, which has resulted in changed
public expectations about gender representation in the workplace, especially in Western countries. For example, the current use of the gender-neutral term flight attendant
rather than the feminine term stewardess commonly used in the past was greatly influenced in the United States by a federal court ruling that female gender is not a legiti-
8
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mate occupational qualification for effectively providing airline hospitality service.
The court made this ruling despite evidence of contrary popular opinion, which in turn
has led to a shift in social expectations. Globally there also is an increasing movement
in corporate social responsibility (CSR)—greater awareness of the need for socially
responsible corporate behavior toward the environment, communities hosting MNC
operations, and employees associated with MNC business. This increased global awareness, with the resulting pressure to preserve global reputation and public image, in
many cases is raising expectations for the standard behavior and reporting that companies must meet to be accepted as viable participants in the global marketplace.10
Competition
Global competition to increase market share and profitability by increasing the number of satisfied customers at lower costs is a primary driver of globalization. Companies that are reluctant to compete risk bankruptcy. With greater accessibility to cheaper
labor markets, companies are motivated to move their operations, which affects
workforce relations and employment in both home country and host country environments. With the support of advancing information and communication technologies, companies are able to gain efficiencies by consolidating and moving, through
offshore outsourcing, many operations to less expensive labor markets. A company’s
human resources also represent a primary source of competitive advantage through
such key contributions as workforce innovation and human capability. Companies
compete for quality human resources and are able to successfully attract and retain
human talent through their workforce management practices.
Demographics
As we will examine in detail in chapter 3, labor force demographics, or general labor
characteristics such as age, gender, ethnicity, and skill base, can influence the nature
of challenges and practices of workforce management. For example, in many industrialized countries an aging labor force must be replaced to meet work demand, which
causes many governments to loosen immigration restrictions and allow more people
of different cultures and ethnicities into their labor force, thus introducing new diversity challenges into the workplace. The labor skill base also is a critical area of
demographics that MNCs carefully consider when planning for opening operations
in other countries. Although a low local wage rate can be an attractive factor in
foreign direct investment (FDI) considerations, such an advantage may not compensate for a labor force lacking in basic skills, which will require significant training
costs and time to get operations up to an acceptable level.
Innovation
Our world is changing continuously, posing an ongoing challenge for organizations to
monitor and anticipate changes and adjust appropriately to survive and compete successfully. Innovations that improve organizational performance often usher in major changes
INTRODUCTION
AND
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9
worldwide that affect workforce management. Two particular forms of innovation that
we will examine here involve management practice and technological innovation.
Management Practice. Throughout the world, new developments and innovations
in management practice, from action-learning training methods to zero-based human resource forecasting, can potentially affect people in the workplace. The
offshoring of back-office operations, whether in-house or outsourced services, to
foreign worksites is a management practice innovation that is especially pertinent to
global workforce management. Outsourcing itself represents an important innovation in management practice that allows companies to focus on their core competencies while partnering on-site or on a distance basis with other firms that provide a
service that they do best, thus introducing particular challenges in workforce management across company borders. As with any successful adoption of innovation,
effective workforce learning and adjustment to change are needed to overcome natural resistance.
Organizations can pick up new ideas and innovations for improving workforce
management practice in a number of ways, including attending professional conferences and meetings where information is disseminated formally through professional
presentations and informally through networking, and keeping up with professional
publications and online newsletters. One first generation Iranian-American executive who runs a successful packaging business in the United States once commented
to us that the primary reason he maintains about 25 percent of his business abroad is
to force him to travel to various parts of the world, which exposes him to new ideas
that he can adopt to improve his business. It is critical for organizations and managers to use different means to regularly scan their external environment for sources of
potentially useful innovations and proven “best practices” of other companies, which,
if appropriate, can be adopted and spread company-wide through effective internal
knowledge-management processes.
Organizations can also tap into current ideas and innovations in the external environment by engaging consulting organizations to diagnose problems, provide solutions, and help implement programs that have been proven effective in other firms.
A wide variety of consulting firms, both large and small, helps disseminate innovations for improving workforce management practice. Some firms, such as Watson
Wyatt Worldwide, may provide general human resource consulting services, whereas
others, such as ORC Worldwide, specialize in workforce compensation at all levels.
Technological Innovation. One of the most visible external factors affecting
global workforce management today is technological innovation. When companies adopt a technical innovation—even a simple upgrade in computer software—
workforce training is needed. On a much broader scale, we see that technological
innovation is bringing greatly increased efficiencies to work processes and reducing the number of workers needed to achieve the same level of productivity. In
fact, as will be discussed in chapter 3, more jobs worldwide have been lost in the
manufacturing sector due to technological innovation in work operations than to
any other factor. In addition, innovations in the information and communication
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technologies have facilitated the ability of companies to “offshore” many backoffice and call-center services.
Governments
Besides their membership in intergovernmental organizations, governments individually and collectively (through bilateral and multilateral agreements and regular
meetings) have a central role in regulating economic activity and can exert tremendous influence on workforce management practices. We now will examine these
individual and collective forms of government influence.
Individual Governments. A key purpose of government is to secure and protect the
well-being of its citizens, including their economic livelihood. Thus, governments typically are active forces in facilitating economic health that leads to increased employment opportunity for the national labor force. In the global marketplace, governments
are increasingly active in improving national infrastructures, investing in education
and labor force skill development, and negotiating tax arrangements to successfully
attract MNCs that provide new jobs through their foreign direct investment. Governments also have a responsibility to monitor labor practices to protect the rights of
workers, as well as those seeking employment, and to ensure safe working conditions.
This ongoing employee protection and specification of workforce management policy
is achieved through the establishment of government agencies, laws, and regulations
that prescribe and enforce acceptable company behavior.
Besides compliance to employment laws and regulations, individual governments
also may exert less direct forms of influence to encourage responsible workforce
management within their borders, such as with the United Kingdom appointing a
minister for Corporate Social Responsibility (CSR) within its Department for Trade
and Industry, and France legally requiring companies to include social and environmental impact in their annual reports. As with social preferences, government employment laws and regulations can differ dramatically from one country to another.
For example, the job opening announcement ending the opening scenario of this
chapter, “JOB OPENINGS FOR GREAT NUMBER OF WOMEN WORKERS,”
would be legally prohibited in several developed countries that consider gender an
irrelevant factor in most employment decisions. Therefore, managers should review
local and national laws and regulations to ensure legality in making workforce management decisions.
Multilateral Agreements. Beyond the influence of a single government, two or
more governments commonly form agreements and treaties that serve to promote
cross-border commerce and economic development for all governments involved.
For example, the North American Free Trade Agreement (NAFTA), the Association
of South East Asian Nations (ASEAN) Free Trade Area, and MERCOSUR (abbreviation for Spanish common market, involving Argentina, Brazil, Uruguay, and Paraguay, as well as other South American countries, as associate members) all represent
multilateral agreements that have increased trade across borders with accompanying
INTRODUCTION
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11
workforce implications. These treaties and agreements often stipulate workforce standards and requirements that each country must uphold. However, a common criticism of these agreements, as in the case of the U.S.–Central America Free Trade
Agreement (CAFTA), is that they specify that only present labor laws of each country be upheld and fail to require adherence to the higher standards of the United
Nations (U.N.) or International Labor Organization (ILO).11
The most integrated multilateral agreement between governments is the European Union (EU), with an extensive governing and regulatory structure affecting
organizations in all EU current and prospective member countries as well as companies doing business within this huge economic bloc. Thus, the EU has a powerful
impact on global business practice. The establishment of the EU and its labor mobility provisions has resulted in a major increase in labor migration across national
borders, creating much greater challenges in managing diversity than experienced in
the past, as well as bringing into developed countries of the EU an increasing supply
of highly motivated labor from less-developed economies and generating a downward pressure on local wages. To signal EU priorities and keep focused attention on
important social issues associated with business, the European Commission (the driving force and executive branch of the EU) designated 2005 as the year of corporate
social responsibility in EU countries.12
In light of its continued growth, anticipated future expansion, and lack of previous
consolidated policy guidelines, the EU’s Charter of Fundamental Rights was solemnly proclaimed in Nice in December 2000. The fifty-four-clause charter sets out
in a single text, for the first time in EU history, the whole range of civil, political,
economic, and social rights of EU citizens and all persons residing in the EU, as well
as a significant set of explicit guidelines affecting workforce and employment practice (see Figure 1.2 for a sampling of workforce-related rights from the EU Charter).
These rights are based on the fundamental rights and freedoms recognized by previous EU documents and constitutional traditions of EU member countries, including
the Council of Europe’s Social Charter and the Community Charter of Fundamental
Social Rights of Workers.13
Although individual member states continue to carry out specific employment
policy and can follow their own employment regulations where they satisfy EU
guidelines, the EU Charter of Fundamental Rights provides a common focus on
employment rights. And although the EU Charter is only a political declaration, it
is likely to have legal effects, as the EU’s European Court of Justice will take it
into account in its decisions. The EU has passed numerous specific directives and
regulations for protecting worker rights and well-being that are now centrally reinforced and reconfirmed by the EU Charter of Fundamental Rights. A good illustration of EU influence on changing and improving workforce protective rights is a
recent review of employment policies and practices in Estonia, a country striving
to eventually join the European Union after complying with EU requirements. In
an EU report that reviewed Estonian social policy progress toward future EU accession, the EU called on Estonia to increase the unemployment benefit, to extend
the right to strike to the public sector, and to put an end to the potential exploitation of children by family firms.14
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Figure 1.2














Sample of Worker Protection Guidelines from the European Union’s Charter of
Fundamental Rights
No one shall be held in slavery or servitude.
No one shall be required to perform forced or compulsory labor.
Trafficking in human beings is prohibited.
Everyone has the right to education and to have access to vocational and continuing training.
Nationals of third countries who are authorized to work in the territories of the Member States
are entitled to working conditions equivalent to those of citizens of the Union.
Any discrimination based on any ground such as sex, race, color, ethnic or social origin, genetic
features, language, religion or belief, political or any other opinion, nationality, disability, age, or
sexual orientation shall be prohibited.
Equality between men and women must be ensured in all areas, including employment, work,
and pay.
The Union recognizes and respects the right of persons with disabilities to benefit from measures
designed to ensure their independence, social and occupational integration, and participation in
the life of the Community.
Workers and employers have the right to negotiate and conclude collective agreements at the
appropriate levels and, in cases of conflicts of interest, to take collective action to defend their
interests, including strike action.
Every worker has the right to protection against unjustified dismissal, in accordance with
Community law and national laws and practices.
Every worker has the right to working conditions that respect his or her health, safety, and dignity.
Every worker has the right to limitation of maximum working hours, to daily and weekly rest
periods, and to an annual period of paid leave.
The employment of children is prohibited. The minimum age of admission to employment may
not be lower than the minimum school-leaving age. Young people admitted to work must have
working conditions appropriate to their age and be protected against economic exploitation and
any work likely to harm their safety, health, or physical, mental, moral, or social development or
to interfere with their education.
Everyone shall have the right to protection from dismissal for a reason connected with maternity,
and the right to paid maternity leave and to parental leave following the birth or adoption of a child.
The G8–G7, G8+5, G77. Besides forming long-term agreements and treaties involving cross-border commerce, governments meet regularly to discuss common
pressing issues that can have major implications for global workforce management.
The G7 countries (that is, the Group of 7 leading industrialized national governments—G8 when Russia is included on matters other than those attended to by G7
financial ministers) of France, Germany, the United Kingdom, Italy, Japan, Canada,
and the United States meet in an annual summit to deal with macroeconomic management, international trade, East-West economic relations, energy, and relations
with developing countries. From its initial formation as a response to the energy
crisis of 1973, the group has broadened considerably to include other issues on its
agenda, such as employment, the Internet, and other transnational issues such as the
environment, crime and drugs, and a host of political-security issues ranging from
human rights through terrorism and regional security to arms control.
The G7/8 summit provides an important occasion for world leaders to discuss
major and often complex international issues and develop a timely multilateral
response to current concerns. This summit of industrialized leaders also gives
direction to the larger international community by setting priorities, defining
new issues and initiatives, and providing guidance to established international
INTRODUCTION
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13
organizations. The G7/8 leaders also meet on an ad hoc basis to deal with pressing issues and employ representatives and task forces to follow up between meetings on action agreements. Additional country representatives may be invited to
participate in summit discussions based on their potential strategic involvement,
such as the five additional countries, Brazil, China, India, Mexico, and South
Africa in 2005.
There is also growing solidarity among countries represented on the other end of
the economic spectrum, as evidenced by the regular meeting of the Group of 77.
Established in 1964 by seventy-seven developing countries at the end of the first
session of the United Nations Conference on Trade and Development in Geneva, the
membership of the G77 has increased to 132 countries. However, the original name
has been retained because of its historic significance. As the largest coalition of
developing countries in the United Nations, the G77 provides the means for the
developing world to articulate and promote its collective economic interests, foster
economic and technical cooperation among developing countries, and enhance its
joint negotiating capacity on major international economic issues. For example, a
major concern among developing countries is the growth of increasing labor and
environmental restrictions and standards affecting foreign direct investment, which
they identify as greatly slowing and decreasing the amount of country investment
that would help build the economy and provide much-needed jobs.
Intergovernmental Organizations
Beyond governmental meetings and agreements, much more in-depth, ongoing
transnational governmental and administrative activities and supportive structures
are provided by the formation of intergovernmental organizations. An intergovernmental organization, or IGO, is an institution made up of the governments of member states that have joined together to cooperate on common goals. An IGO usually
has a formal, permanent structure with various organs to accomplish its tasks.
United Nations. The United Nations, with its 191 general assembly members, is
the largest, most comprehensive intergovernmental organization and global forum
in the external environment of global workforce management. A multitude of agencies and initiatives of the U.N. carry out its global priorities of peace and security,
economic and social development, human rights, humanitarian affairs, and international law. In addition to the workings of its agency specifically dedicated to international labor issues (the International Labor Organization, or ILO), the U.N. has a
high-profile influence on global workforce management through its Global Compact, officially launched in 2000. The Global Compact is a list of ten universal principles in the areas of human rights, labor, the environment, and anti-corruption (refer
to Figure 1.3). The Global Compact is completely voluntary and does not monitor,
enforce, or measure the behavior or actions of companies relative to the compact.
Rather, the Global Compact relies on a joint effort involving public accountability
and transparency, companies with enlightened corporate social responsibility, labor
representatives, and non-profit citizen organizations (for example, non-governmental
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Figure 1.3 United Nations Global Compact
Human Rights
• Principle 1: Businesses should support and respect the protection of internationally proclaimed
human rights; and
• Principle 2: make sure that they are not complicit in human rights abuses.
Labor Standards
• Principle 3: Businesses should uphold the freedom of association and the effective recognition of
the right to collective bargaining;
• Principle 4: the elimination of all forms of forced and compulsory labor;
• Principle 5: the effective abolition of child labor; and
• Principle 6: the elimination of discrimination in respect of employment and occupation.
Environment
• Principle 7: Businesses should support a precautionary approach to environmental challenges;
• Principle 8: undertake initiatives to promote greater environmental responsibility; and
• Principle 9: encourage the development and diffusion of environmentally friendly technologies.
Anti-Corruption
• Principle 10: Businesses should work against all forms of corruption, including extortion and
bribery.
Source: U.N. Global Compact Website, www.unglobalcompact.org (accessed July 8, 2005).
organizations, or NGOs) to promote adoption of the principles upon which the compact is based. To facilitate the global acceptance and utilization of these principles,
the administrative function of the Global Compact offers policy dialog meetings,
training, country/regional support networks, and sponsored implementation and test
projects.
International Labor Organization (ILO). With a primary focus on the global
labor force, the International Labor Organization is the specialized agency of the
U.N. that seeks the promotion of social justice and internationally recognized human and labor rights. The ILO was founded in 1919 at the end of World War I
through the tripartite participation of governments, employers, and employee unions
during the initial planning of the ill-fated League of Nations. It later became the
first specialized agency of the U.N. in 1946. The ILO formulates and monitors
international standards in basic labor rights across a broad spectrum for its 178
member countries. Within the U.N. system, the ILO maintains its unique tripartite
structure with workers and employers participating as equal partners with governments and provides training and advisory services to all parties in such areas as
vocational training and rehabilitation, employment policy, labor and industrial relations, management development, social security, labor statistics, and occupational safety and health.
In 1998, in an effort to build considerable global influence among member governments and employer and worker organizations to counter serious workforce challenges associated with globalization, the ILO adopted the Declaration on Fundamental
Principles and Rights at Work. The Declaration, expected to be upheld and reinforced by ILO member countries, covers four major areas:
INTRODUCTION
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2.
3.
4.
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15
Freedom of association and the right to collective bargaining
The elimination of forced and compulsory labor
The abolition of child labor
The elimination of discrimination in the workplace
Organization for Economic Cooperation and Development (OECD). The Organization for Economic Cooperation and Development, which was created as an economic counterpart to NATO, grew out of efforts in 1947, supported by the United
States and Canada, to coordinate the reconstruction of Europe after World War II.
Since then its mission has been to help governments achieve sustainable economic
growth and employment and rising standards of living in member countries, thus contributing to the development of the world economy. Based in Paris, the OECD is a
main proponent of economic globalization and an active overseer of associated economic, social, environmental, and governance challenges. Its thirty member countries
are demonstrably committed to a market economy and a pluralistic democracy. These
countries produce 60 percent of the world’s goods and services and are home to almost
90 percent of foreign direct investment flows and to 97 out of the top 100 MNCs. The
OECD shares expertise and views on topics of mutual concern with more than 100
countries worldwide, from Brazil, China, and Russia to the least developed countries
in Africa. For more than forty years the OECD has been one of the world’s largest and
most reliable sources of comparable statistical, economic, and social data.
In 1976 the OECD set forth its Guidelines for Multinational Enterprises, covering
a wide range of corporate responsibility issues, including employment and industrial
relations, environment, information disclosure, competition, financing, taxation, and
science and technology. These guidelines represent a multilaterally endorsed and
comprehensive code of conduct recommended by governments to MNCs. The guidelines have been revised periodically, and although not legally binding, many members of the OECD reportedly refer to them when drafting national legislation on
corporate behavior. For example, the Netherlands links financial support plans for
large companies to compliance with the OECD guidelines. Recently revised OECD
guidelines call for support for core labor standards promoted by the ILO’s Declaration on Fundamental Principles and Rights at Work (for example, the right of employees to be represented by trade unions of their choice and to bargain collectively,
nondiscrimination, and the elimination of child labor and forced labor) and expand
workforce management concerns to also involve employees of suppliers as well as
executive bribery and corruption. As another illustration of OECD influence, South
Korea is one OECD member that has come under OECD official censure and imposed measures for change due to its failure to live up to promises made in its membership application to reduce labor union restrictions. The revised guidelines also
provide stronger implementation procedures through the creation within countries
of National Contact Points for working with governments and companies to promote
the guidelines, handle inquiries, and help to resolve issues that arise.15
World Trade Organization (WTO). The World Trade Organization is the only
global intergovernmental organization dealing with the rules of trade between
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nations, which involves tariff and trade barrier reductions and the resolution of
international trade disputes. At its heart are the WTO agreements, negotiated
and signed by the bulk of the world’s trading nations and ratified in their parliaments. The WTO has nearly 150 members, accounting for over 97 percent of
world trade. Decisions are made by the entire membership, typically by consensus. The WTO’s goals are to regulate and help facilitate a smooth, fair, and predictable conduct of global business among producers of goods and services,
exporters, and importers.
An ongoing debate has existed about whether the WTO should use sanctions and
regulations to ensure the protection of core labor rights among trading partners, such as
those advocated by the ILO. Unions in developed countries, motivated to preserve
local jobs by restricting work operation relocation and foreign direct investment in
developing countries, are particularly vocal in support of the WTO requiring developing countries to adhere to high labor standards. Governments of developing countries
generally are against a WTO immediate requirement of higher labor standards, which
they believe will serve as a cost barrier to increased FDI, a significant source of new
tax revenue and jobs. Those taking the perspective of developing nations such as the
Philippines and Malaysia argue that the WTO’s inclusion of new labor standards contributes to denying developing countries the benefits from their current comparative
advantage in labor-intensive products and ultimately slows the process of development and industrialization in poor countries and robs them of the potential gains of
trade liberalization.16
Financial IGOs. The two major global institutions that focus on financial issues
attendant to challenges and needs of globalization are the World Bank and International Monetary Fund (IMF). Both are dedicated to reducing world poverty and
raising the economic health and stability of developing countries. The IMF, supported by its 184 country members, has a more narrow financial focus, working to
promote international monetary cooperation, exchange stability, and orderly exchange
arrangements. With particular regard to the needs of developing countries, the IMF
provides advice and technical services to restructure debt and revise fiscal and economic regulatory policy toward greater national investment in infrastructure, education, and other internal factors leading to economic growth and employment.
Frequently the IMF is criticized by labor and other employee-interest groups when
its fiscal policy advice and debt restructuring prescriptions conflict with local labor
practices, such as in IMF recommendations to loosen restrictive labor laws that are
believed to impede new business development and FDI.17
The World Bank, an agency of the U.N., has a much broader scope than the IMF,
working directly and in partnerships with member governments, agencies, and nonprofit organizations such as World Vision and CARE to support programs and projects
to counter illiteracy, disease, child and family abuse, corruption and fraud, and other
maladies associated with poverty in developing countries. The World Bank provides
loans, policy advice, technical assistance, and knowledge-sharing services to lowand middle-income countries to reduce poverty and improve living standards. The
Bank promotes growth to create jobs and to empower poor people to take advantage
INTRODUCTION
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17
of economic growth opportunities. One of the world’s largest sources of development assistance, the World Bank is composed of five sub-agencies, all owned by its
184 member countries and whose activities include providing interest-free loans and
credit for project and program support, private sector investment, investment risk
insurance, and dispute resolution assistance. The World Bank also works closely
with the IMF and requires joint membership in that IGO.
IGO Impact. There has been criticism of the voluntary nature of IGOs’ various
declarations, guidelines, conventions, and measures because of their general lack of
enforceability. For example, although China is a member of the ILO and is supposedly obligated to follow the Declaration on Fundamental Principles and Rights at
Work, including the “freedom of association and the effective recognition of the
right to collective bargaining,” it still currently violates this core right of the Declaration by banning the formation of independent labor unions that could engage in
collective bargaining on the workers’ behalf.18 Nevertheless, the U.N. Global Compact, OECD Guidelines, and ILO Declarations serve as clear, consistent standards
for all member countries to work toward. For example, the active efforts of the OECD
directed at reducing corporate corruption in the global marketplace through close
company interaction and conference hosting has resulted in measurable improvement of company behavior in this arena. And although there continue to be difficult
challenges associated with social support and labor protection in China with its ongoing immense economic transformation, significant improvements have been identified since China’s accession to the WTO and agreement to observe membership
requirements of that world body.19
There also is evidence that the encouragement of voluntary norms and codes of
conduct can bring about a significant shift in corporate behavior to maintain a
positive corporate image and reputation, and to encourage the formation of selfmanaging internal company values and ethical codes for doing business. In addition, there likely will continue to be greater diligence in fully adopting and enforcing
these rights and principles and other conventions and recommendations that are
placed in high profile when they are reinforced by other global entities, and especially when made contingent to funding, loan, and trade approvals by the World
Bank, IMF, and the WTO.20 For example, in 1999, the United States, with WTO
facilitation, signed a three-year trade pact granting up to 14 percent annual increases in the U.S. quota of garment imports from Cambodia if businesses in that
country met the ILO’s core labor standards. Although the process led to strikes
and angered some employers, the Cambodian government made inspections mandatory for any garment factory desiring to export to the United States. There also
is a strong expectation that the WTO eventually will act, for the purpose of increasing world trade and business operation efficiencies, to harmonize the many
different forms of labor rights and protections under a common set of standards
required of companies operating in all WTO member governments and their trading partners. As stated by ILO Director-General Juan Somavia, “The global
economy needs a floor of core labor standards. . . . It could be five years, but labor
rules are going to be there.”21
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E MPLOYEE -I NTEREST O RGANIZATIONS
Many different non-profit organizations are dedicated to protecting and promoting
the interests of workers and improving workforce management practice. These
organizations of diverse purposes and sizes are found at local, national, regional,
and global levels. They continue to interact with governments, intergovernmental
organizations (e.g., the U.N. and World Bank), and companies and help shape public opinion and social preferences to exert powerful influence on how people are
managed in the world marketplace. Major forms of these employee-interest organizations include labor or trade unions, employer and professional associations,
and NGOs.
Labor Unions. Technically, a labor or trade union is a group of workers who act
collectively to address common concerns or issues associated with an employment
arrangement. However, we are treating unions here as an external factor that influences global workforce management because they are typically structured as separate organizations, external to firms, that legally represent employees and often
collectively comprise their membership across many organizations. Unions can vary
dramatically in purpose and structure from one country to another, with some being
organized by industry (for example, the United Kingdom’s National Union of Rail,
Maritime and Transport Workers), others by profession, trade, or functional area
(for example, Australia’s Queensland Nurses Union), and yet others with an emphasis on broader social and political issues. Although unions generally have a primary
influence on workforce issues at local and national levels and are beginning to make
advancements toward global solidarity, they still lag far behind the global reach of
MNCs. Because unions have a key role in ongoing employee relations in many organizations, they will be examined in much more detail in chapter 11.
Employer and Professional Associations. Employer associations focus primarily
on the interests of their member companies, yet activities also indirectly involve the
interests of employees. Like trade unions, employer associations are often recognized as legal entities, particularly where their role involves the regulation of relations between employers and unionized employees. And like employee trade unions,
employer associations can vary greatly in size and may be structured by industry,
such as the United Kingdom’s Retail Motor Industry Federation, or functional specialization, such the Employers Group of Southern California, which specializes in
human resource management needs of small- and medium-size firms. One of the
largest employer associations is the Union of Industrial and Employers’ Confederations of Europe (UNICE), describing itself as “the voice of business in Europe,” with
membership made up of thirty-four business federations from twenty-seven countries in Europe.22
Traditionally, the principal role of an employer association has been to represent
its members during multiemployer collective bargaining with recognized trade unions.
Although multiemployer bargaining continues in some industries, employer associations now place much greater emphasis on providing advisory services and train-
INTRODUCTION
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19
G LOBAL W ORKFORCE C HALLENGE 1.1
A DVANCING G LOBAL W ORKFORCE
P ROFESSIONAL P RACTICE T HROUGH SHRM
Founded in 1948 under the name of ASPA (American Society for Personnel Administration), the
Society for Human Resource Management (SHRM) is the world’s largest association devoted to
human resource management. Representing more than 200,000 individual members in more than
550 affiliated chapters located in more than 100 countries, the Society’s mission is to serve the
information and skill needs of human resource (HR) professionals by providing the most essential and
comprehensive resources available through conferences, workshops, professional certification,
membership directory networking, placement services, speaker and consultant referral, online discussion forums, and publications. In addition to being an influential voice, SHRM’s mission is to
advance the human resource profession to ensure that HR is recognized as an essential partner in
developing and executing organizational strategy. SHRM’s Global Forum, an online community for
global HR professionals, includes news, features, and useful links as well as current online discussions on various topics such as global staffing, compensation, and employment law on its Global HR
Bulletin Board. A sampling of specific discussion topics that members have engaged in with one
another on the Global HR Bulletin Board includes global cost-of-living information, recruitment
assistance in Argentina, guidance for plant closures in Mexico, and medical benefits for employees
in China. SHRM also provides specific professional development and certification for HR professionals with international and cross-border responsibilities through its Global Learning System comprehensive test preparation and reference tool, and its Global Professional in Human Resources
certification exam.
Source: Adapted from information available at www.shrm.org (accessed July 27, 2005).
ing in several aspects of workforce management. For example, the sales professionals from manufacturing and distribution firms participate in a week-long Qualified
Safety Sales Professional course covering fundamentals in risk management, safety
engineering, and workers’ compensation, co-sponsored by the International Safety
Equipment Association and the Safety Equipment Distributors Association.23 These
organizations also are particularly active in lobbying and trying to influence government and world body laws and measures in ways, including those related to workforce
management, that are favorable to or at least minimally restrictive for employer firm
members.
Professional associations address the practical knowledge and career needs of
working professionals who likely would not be organized in a union. These nonprofit organizations, often with global membership, have focuses ranging from very
general and functional, such as the Society for Human Resource Management, to
much more specific, such as the International Association for Human Resource Information Management. Like employer associations, professional associations primarily emphasize the improvement of organizational performance and are very active
in disseminating innovation and knowledge, including that related to global workforce
management, through such means as conferences, workshops, publications, and online
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discussion groups, for improving workplace performance (for example, refer to Global Workforce Challenge 1.1 for more detailed information about SHRM, a leading
professional association for global human resource professionals).
Non-Governmental Organizations (NGOs). Perhaps the strongest force today to
counter the great global influence of MNCs is the combined impact of non-governmental
organizations, which have exploded upon the national and global scene in ever-increasing numbers over the past thirty years. This dramatic NGO presence has been
facilitated by global changes in prosperity, education levels, freedom, mobility, increased transparency of markets, and advances in information and communications
technologies, coupled with a growing awareness of governments’ inability or unwillingness to safeguard against negative developments incident to globalization.
NGO influence in various forms is responsible for major changes in corporate behavior and policy as well as greatly increased government scrutiny and reform activity. MNCs are increasingly confronted by a range of international agreements on
operational standards and codes of conduct, including those related to workforce
management issues, driven by strong collective, network-leveraged NGO pressure
for both standard/code development and implementation.24
There are literally millions of these independent, non-partisan, non-profit advocacy and human services groups worldwide, from very small entities to much larger
organizations such as Human Rights Watch, Amnesty International, World Vision,
and CARE. Sometimes referred to as social entrepreneurship or citizen groups, NGOs
can be religious based or non-sectarian, and their missions, generally related to social, humanitarian, and environmental concerns, differ greatly. NGOs may have a
global focus with a central headquarters and offices in many countries, or they may
have a local, community, or national focus. They may be characterized as more
vocal and high-profile advocacy groups, applying through the mass media intense
public pressure on governments and corporations, or they may be more operational
in nature, assisting in implementation projects and activities in line with their mission through partnerships with governments, corporations, and other NGOs. Many
NGOs sponsor both advocacy and operational activities.25
Based on high-profile media coverage of major economic meetings of the G8 financial ministers or IMF, NGOs may be perceived more commonly as vehement activist
adversaries of MNCs and of weak or corrupt governments that collude with MNCs.
However, a growing trend for entrepreneurial NGOs is to “fill in the cracks” or exploit
niche opportunities in social and environmental protection services that are not addressed by governments and MNCs. Many of the largest NGOs have working relationships and even official associative status with IGOs such as the United Nations or
World Bank. In fact, NGOs are increasingly active partners with MNCs, governments,
and intergovernmental organizations in monitoring, diagnosing, and serving these needs.
MNCs often see major advantages that NGOs provide in assisting with the implementation of corporate commitments to social responsibility, including the following:26
• Local knowledge base, because NGOs tend to work closely with grassroots
movements
INTRODUCTION
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21
G LOBAL W ORKFORCE P ROFESSIONAL P ROFILE 1.1
NGO S UPERSTAR L ISA V ENE K LASEN
Lisa VeneKlasen is the executive director and co-founder of Just Associates (JASS), an international
NGO based in Washington, D.C., that aims to strengthen and diversify citizen voices, leaders, and
organizations, and promote equitable, democratic solutions to poverty, inequality, and injustice. JASS
collaborates with its worldwide partners, including grassroots groups, advocacy coalitions, labor
unions, social movements, and international development and human rights organizations, to focus
on such local and global issues as health care, budget transparency, women’s rights and empowerment, employment, and human rights. VeneKlasen began her involvement in social change through
community-based adult education and citizen participatory research in Central America and the
United States. She has a master’s degree in public policy from Harvard University’s Kennedy School
of Government and had early experience in political lobbying work. From 1997 to 2002, VeneKlasen
worked with the Asia Foundation, where she designed and conducted a citizen advocacy capacitybuilding program with advocates from Asia, Africa, and Latin America for the Global Women in Politics
Program. From 1987 to 1994, she assisted, trained, and collaborated with dozens of citizens’ and
women’s groups in Latin America and Africa under the auspices of Women, Law and Development
International. She also lived in Zimbabwe for six years where she coordinated a twelve-country effort
that led to the creation of Women in Law and Development in Africa, a regional network committed
to women’s rights. During the past decade she has advised and assisted dozens of NGOs worldwide
to develop and conduct advocacy strategies and training programs. Educating and organizing local
citizen groups is key, as VeneKlasen asserts, “Experience shows that education linked to organizing
on local issues is the most effective way of engaging people to think about, understand, and take
action upon the injustices produced by the global economy.” Since 1997, VeneKlasen has been
closely involved in a diverse range of budget advocacy activities with groups in Uganda, the
Philippines, and Indonesia to ensure that actual budget allocations support advocacy goals. In her
budget-advocacy development work, VeneKlasen adheres to two important rules: (1) budgets are
nine parts politics and one part information; and (2) knowledge plus noise equals political change. She
recently coauthored a book titled A New Weave of People, Power & Politics: The Action Guide to
Advocacy and Citizen Participation, published by World Neighbors.
Sources: Adapted from the Just Associates Website, www.justassociates.org (accessed July 28,
2005); and L. VeneKlasen, “Citizen Action, Knowledge and Global Economic Power: Reflecting on
Current Practices and Challenges Ahead.” Website of Funders Network on Trade and Globalization,
www.fntg.org/news/index.php?op=read&articleid=1050 (accessed July 28, 2005).
• Local network and community connections
• Credibility, given the NGOs’ altruistic mission and purpose
• Past and existing partnerships with governments
In some cases an MNC may use the operational expertise of NGOs in carrying out
the MNC’s own plans, such as with independent, impartial safety inspections at
company-owned and outsourced manufacturing facilities around the world. Or NGOs
themselves may approach MNCs to gain corporate, financial, and other resource
commitment and sponsorship to support the NGO’s goals, which again may enhance
the MNCs’ reputation in social responsibility. Operational NGOs may also provide
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direct assistance with company workforce management needs, such as with Mission
Australia, a non-denominational Christian organization providing employment training and placement services for disadvantaged and homeless individuals. Another
example is MAYA (Movement for Alternatives and Youth Awareness), a Bangalorebased NGO that launched LabourNet, a multi-industry job placement network for
the informal sector working poor. According to MAYA’s director, J.P. Solomon,
“Informal labor constitutes 90 percent of the workforce, and we intend to provide a
framework for them to interact with the market in a mutually beneficial manner.”27
On a broader scale, NGOs led by passionate social entrepreneurs have been very
impressive with their initiative, resource mobilization, and persistence in networking and collaborating to provide educational, health and safety, housing, and other
community-development services that greatly enhance the local social and labor
infrastructure within which MNCs may recruit workers and operate successfully.
For example, since the 1980s, NGOs in cooperative networks have assisted Mexican
colonias, or poor, marginalized communities along the U.S.–Mexico border, in developing the community and providing basic services for workers staffing the
maquiladora industry.28
I NTERNAL C OMPANY F ACTORS I NFLUENCING G LOBAL
W ORKFORCE M ANAGEMENT
In addition to the previously examined factors in the external global environment, important factors within a company can have a major influence on workforce management. The combination of these internal factors often has a greater influence on company
operations in general and workforce management in particular than the important external factors that we have previously examined. They can also help distinguish a company from others in the same environment. Major internal factors that we will examine
briefly here are company culture, climate, strategy, and structure.
Company Culture
An organization’s culture represents the overall prevailing set of assumptions, attitudes, beliefs, norms, priorities, and values within the organization. It is greatly influenced by founding leaders and the collective common history of its members. For
example, Teva Pharmaceuticals is a rapidly growing multinational firm based in Israel with foreign operations in Europe and North America. Its top management are
all Israelis with common early experience in Israel’s military, so it is no wonder that
the culture can be characterized as informal, aggressive, fast paced, and “commandolike.”29 The culture of an organization is communicated explicitly (for example,
through employee handbooks, written messages, and executive speeches) and implicitly (for example, through behavior modeled by leaders, informal communications such as the “grapevine,” and reward/punishment contingencies) to indicate which
behaviors are desired and which are unacceptable. Thus, culture can have a powerful
influence on behavior expressed by organizational members and tends to orient and
educate new organizational members naturally. Because of its pervasive and often
INTRODUCTION
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OVERVIEW
23
unconscious nature, organizational culture is very difficult to change, typically requiring considerable time and comprehensive planning for altering company behavior and practice, especially focusing on a thorough redesign of company rewards
(both formal and informal). Some organization cultures, like national cultures, can
be very tight, or homogeneous, with little variation in style and preference of acceptable behavior; other cultures, such as those in MNCs with extremely decentralized
operations that share only a common name—and perhaps not even that—can be very
loose, or have several subcultures.30
With its pervasive influence, organizational culture has a major impact on managerial thinking patterns and philosophy and is expressed behaviorally through general management style, strategy, company policy and behavioral prescriptions, and
actual practices. For example, an MNC’s ethnocentric culture at headquarters tends
to perpetuate its own leadership homogeneity, with major developmental opportunities and leadership promotions being reserved for those of the same nationality as
the current leadership. Although national culture is emphasized more in this text due
to the focus on global workforce management, the importance of the influence of
corporate culture should not be underestimated. In fact, several researchers and practitioners believe that corporate culture can have a greater influence and unifying
effect on MNC behavior and performance than national culture, as will be examined
in chapters 7, 9, and 10, dealing with global workforce training, performance management, and compensation, respectively.31
Company Climate
Unlike the very entrenched, enduring nature of company culture, company climate
refers to the overall present level of satisfaction of a workforce. Climate can change
quickly, such as with an announcement of necessary downsizing of employees and
no pay increases for the coming year. Despite its potentially quick-changing nature,
workforce climate can have a major impact on employee retention as well as such
key company performance measures as productivity, profitability, and customer satisfaction. Because workforce preferences can differ dramatically from country to
country, management should not assume that the same workforce practices and rewards will yield a high level of worker satisfaction across all operations. Instead,
they must continually obtain worker feedback to assess local levels of satisfaction
and customize local workforce management practices to optimize satisfaction within
each operation.32
Strategy and Structure
A company’s strategy is the overall approach it takes to help it compete in the global
marketplace. A recurring message in this book is the importance of aligning workforce
management practices and particular human resource functions (for example, training
and compensation) to company strategy. Effective workforce management is key to
successful company strategy implementation. For example, critical employee adjustment and socialization issues with company growth strategies involve cross-border
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G LOBAL W ORKFORCE C HALLENGE 1.2
G LOBALIZATION ’ S R ACE TO THE T OP
A common nightmare of globalization features poor people working in unsafe conditions to produce
goods for consumers in the West. It is part of what critics call a “race to the bottom,” where MNCs
compete in seeking out places where labor is cheap and safety, health, and environmental laws are
weak. Yes, MNCs roam the globe in search of low-cost labor, but many of them export health and
safety standards when they open factories in the developing world, while others monitor and ensure
acceptable behavior by suppliers to protect their corporate image and adhere to espoused values.
After protest groups rattled Nike in the 1990s, exposing deplorable working conditions under which
some of its high-priced goods were made, Nike now monitors its suppliers to try to ensure that
workers are safe and that their basic rights are protected. Nike’s 2004 Corporate Responsibility
Report details its extensive—and expensive—efforts. The company now employs more than ninety
people in twenty-one countries to enforce a code of conduct that covers safety, child labor, overtime
pay, and human rights. It carried out more than 1,300 inspections and audits during 2004 and
contracted with the Fair Labor Association, an independent non-profit agency, to perform unannounced audits of 5 percent of its plants.
When Western MNCs build their own plants in the developing world, they bring along U.S. and EU
health and safety standards. Intel, for instance, employs nearly 20,000 people at assembly and
testing facilities in Costa Rica, China, Malaysia, and the Philippines that look much like its facilities
in Silicon Valley. “It’s tough at first to import that Intel safety culture and our attention to environmental
detail,” says Dave Stangis, Intel’s director of corporate responsibility. “But over time, it starts to
spread.” DuPont goes a step further: It has a unit called Safety Resources, which has built a business
of consulting with industrial companies in China and India, among other places, that want to improve
their health and safety records.
Globalization represents a “race to the bottom”? Maybe not. In fact, well-known Western firms are
scrambling to protect their public image by complying and even taking impressive leads in following
and enforcing standards posed by the EU, ILO, U.N., OECD, and other entities lobbying for workforce
protection. And these rising standards are spreading in keeping with rising social expectations. This
continual, nearly competitive push to optimize company image and reputation in corporate social
responsibility may actually constitute a “race to the top.”
Source: Adapted from: M. Gunther, “Cops of the Global Village,” Fortune 151(13) (2005):
158–62.
alliances, including mergers and acquisitions. And a global cost-saving strategy involving offshore outsourcing of manufacturing and basic administrative operations has
major implications for workers in both the home country and in planned foreign or host
country operations.33
Strategic management may involve an identification of core company values, followed by an alignment of company policies, activities, and programs that are consistent with those values. An increasingly common value, especially among larger MNCs,
is the recognition of accountability to stakeholders of the MNC, including employees, consumers, governments, and even external entities such as IGOs and NGOs
that request equitable treatment and protection of employees. Thus, the protection of
human rights and workplace health and safety is increasingly emerging as an impor-
INTRODUCTION
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OVERVIEW
25
tant internal value among many MNCs, which then implement consonant practices
across their global workplaces (both company owned and outsourced). In fact, many
recognize their adherence to high workforce standards as a source of competitive
advantage through improved stakeholder relationships and global company reputation for social responsibility.34
An organization’s structure is characterized by how it is organized, both physically and administratively. This structure greatly determines how employees perform their work. Smaller firms tend to have less formal structures, where people
regularly interact in a way to attend to problems and resolve them in a timely fashion. However, in larger organizations where such interactions are less predictable
due to distance or the sheer number of employees, a more formal structure with
regular meetings and reporting procedures may be more productive. Companies with
very centralized structures exert significant controls from central headquarters, decreasing the level of autonomy and decision-making responsibility at foreign operations. Very decentralized structures, on the other hand, often yield significant
decision-making responsibility to local managers in foreign operations. Because of
the major impact of company strategy and structure on workforce management, we
will examine both topics in more detail in chapter 4.
K EY P ERSPECTIVES IN G LOBAL W ORKFORCE M ANAGEMENT
The purpose of this book is to help current and future managers and human resource
professionals of all organizations—large and small, profit and non-profit—recognize
and understand the critical human resource issues underlying the broad global challenges that they face. This book is intended to help managers and human resource
professionals enhance their competence in making effective human resource–related
decisions to better cope with competitive global business challenges and opportunities. This book contains particular areas of emphasis that reflect our own direct experience and understanding as well as our professional and personal values that greatly
influence our work. We will now briefly examine these areas of emphasis that are
fundamental to this book.
G LOBAL P ERSPECTIVE
In this text we specifically refer to global strategy as operating with one global market
in mind, emphasizing standardization across countries and centralized control from
headquarters in managing the business. However, we also more generally consider
global to involve managing the firm with a broad perspective, combining both international and domestic dimensions. From the title Managing a Global Workforce and
throughout the book, our use of global simply refers to the management of a firm’s
human resources wherever they may be located in the world—both in locations abroad
and in the home country of company headquarters. This broad use of the term global is
appropriate not only for large multinational enterprises that have operations throughout the world, such as G.E., Michelin, and Siemens, but also for smaller firms with few
operations abroad, or even for business professionals who fully intend to focus on their
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own country’s domestic market. For smaller companies planning to initiate or expand
operations abroad, the entire world provides a useful context without unnecessary restriction. In addition, even for those not intending to do business abroad, global business forces (for example, global competition, products, vendors, and immigrant labor)
are coming to them in increasing numbers and varieties.
When we use the term international we are generally referring to issues abroad
and away from the national or domestic market of a firm’s headquarters, whereas
when we use the term global, we are considering both contexts in managing the
entire enterprise. Although what we cover in this book certainly is pertinent to nonprofit organizations and other forms of enterprise management and ownership, we
generally take a corporate business enterprise perspective and refer to the multinational corporation, or MNC. Also, although the term multinational often refers to an
enterprise with 50 percent or more of its business conducted or derived away from
the home country domestic market, we use the term broadly, and MNC will have
relevance to firms with operations in only one or a few other countries.
I NCLUSIVE V IEW
OF
W ORKFORCE
This book focuses on managing the entire workforce, wherever they may be located
in the world, to carry out international business objectives effectively. However, past
and even much of the current literature on international human resource management seems to be stuck in a time warp, with little emphasis on the organization’s
employees who do not have citizenship in the home country of company headquarters or who are contingent workers and not technically employed within the organization on a regular basis.
Many businesses in developed countries seem to have not progressed very far from
the ethnocentric model of imperialism. The businesses focus predominantly on the
headquarters-home-country expatriate working abroad and returning (repatriation),
along with accompanying family member adjustment. However, non-expatriate employees working for the company in foreign operations typically are left out of the
picture completely or are given only a brief mention at best. Concepts of preparing
employees to work abroad and building global leadership skills and global perspectives are too often reserved only for the home country workforce. Nevertheless, this
ethnocentric focus will continue to change as more enlightened and less ethnocentric
organizations perceive that human talent does not recognize national borders, citizenship, or ethnic distinctions, and these firms increasingly demonstrate competitive advantage through the effective management of a truly global workforce.
The existing international human-resource-management literature contains little
mention of the growing global contingent workforce at all employment levels (including temporary employees, consultants, and other workers fulfilling contracted
and outsourced services) that increasingly is called on to accomplish company work
demands in more efficient and flexible ways. The international business arena is
experiencing more blurred workforce boundaries associated with increasing uses of
these contingent workers as well as those involved with various strategic alliances
and joint ventures.35 Yet successful MNCs still need to maintain an active influence
INTRODUCTION
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OVERVIEW
27
on (if not manage directly) the workforce in those new organization structures and
working relationships. Especially in such areas as quality control, corporate governance, and social responsibility, MNCs must consider all employees involved in
their primary and secondary business practices. With the increasingly vigilant and
watchful eyes of worldwide consumers and other global stakeholders, MNCs are
finding that they cannot separate their products and services from those workers who
produce and provide them, even when this work is contracted out.
H UMAN R ESOURCES
AND
G LOBAL B USINESS E THICS
Supporting the effort in this book of increased workforce inclusiveness described in
the previous section is a guiding sense of international business ethics. We deeply
agree with the fundamental values of a particular global enterprise, the Society of
Jesus, better known as the Order of Jesuits, within the Catholic Church, which includes the development of the whole individual, social justice, and service of others
as part of its educational institutional efforts throughout the world. We agree with
Donaldson’s ethical framework of social contract theory, which states that any society has the right to expect that profit-generating organizations within its national
borders will enhance the general interests of consumers, employees, and other stakeholders within the society.36 With particular regard to the management of a total and
inclusive global workforce, we believe that there are key moral responsibilities that
institutions acquire, including the following:37
1. Assist all employees, regardless of national origin and location, in the successful execution of their assignments;
2. Avoid the semblance of discriminatory treatment;
3. Encourage full status of foreign employees and their host countries into the
global economy;
4. Foster personal enlightenment and self-enrichment of all employees;
5. Help all employees develop useful, marketable skills;
6. Contribute to the development of a greater, more functional national labor
skills base in countries that host MNC international operations;
7. Encourage a long-term focus on creating an enduring value for a maximum
number of stakeholders, rather than short-term and shortsighted profit for
only a few.
In addition, the human resource function is increasingly placed in the role of the
“conscience” of the organization and has an important responsibility of creating
and monitoring an organizational culture and overall internal environment that
supports and encourages ethical behavior, including the previously listed moral
responsibilities.38 This role extends from the corporate boardroom in establishing
guidelines for corporate governance, especially those affecting the behavior and
compensation of managers and executives, to all levels of the organization with
the development of comprehensive policies and practices that encourage productive and ethical behavior and discourage and decisively correct unacceptable and
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unethical behavior.39 For example, to counter the incidence of dishonesty and fraud,
which typically follows the presence of such essential elements as incentive, opportunity, rationalization, and capability, the human resource function can draw
upon several of its key specializations including job design (to thwart opportunity); reward, compensation, and disciplinary systems (to provide a sense of fairness and equity as well as a clear and adequate disincentive to committing fraud
and other undesirable behaviors); and training (to build internal values and thought
processes that support values of honesty and integrity).40 This significant role of
human resources in international business ethics is particularly challenging because of its increased scope across national borders with vastly different legal
systems and regulations, cultures, and social expectations.
G LOBALIZATION
AND
S OCIAL I MPERATIVES
We are unashamed supporters of globalization. We believe that the worldwide sharing of ideas through open…
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